Audit 410809

Criteria: The Organization may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity. Condition: Exceptions were identified during testing of compliance with period of performance requirements. Specifically, one of thirty-seven sampled expenditures was incurred prior to the eligible grant period; two additional nonsampled expenditures were identified to have been incurred prior to the eligible grant period. In addition, two of thirty-seven sampled expenditures were incurred within the eligible grant period but subsequent to the reporting year under audit; one additional non-sampled expenditure was identified to have been similarly incurred outside the reporting period. Cause: The Organization did not have adequately designed or implemented internal controls to ensure expenditures were adequately reviewed and recorded within the appropriate period of performance for the federal award. Effect or Potential Effect: As a result, the Organization incurred and charged $23,664 of costs to the federal award outside of the approved period of performance. Additionally, the Organization’s unadjusted schedule of expenditures of federal awards included inaccurate information, which may impact decision-making by management or the granting agency. Management recorded an adjusting journal entry of $9,482 to remove a portion of these costs from federal expenditures reported on the schedule of expenditures of federal awards. However, $23,664 of remaining questioned costs were not adjusted and continue to be reported as federal expenditures. Questioned Costs: $33,146 Repeat Finding: No Recommendation: We recommend that management enhance the reconciliation and review process for government grant expenditures recognized as revenue to ensure all required conditions are satisfied prior to recognition.

Criteria: The Organization is responsible for establishing and maintaining effective internal control over compliance with applicable federal statutes, regulations, and federal awards, and for retaining sufficient documentation to demonstrate that such controls are operating as intended. Condition: During our testing, we identified various instances where sufficient evidence of internal control performance was not maintained across multiple compliance requirements: • Costs Incurred (Non-Payroll and Payroll): The Organization has established procedures whereby non-payroll expenditures are reviewed by the Executive Director, including comparison to supporting invoices and documentation followed by an approval via email prior to payment. Similarly, payroll is reviewed each pay period by the Executive Director through comparison of individual and total period wages to a payroll tracking workbook with allocated time by grant. Review is evidence by email when completed. Documentation evidencing these reviews was not maintained to demonstrate that controls were performed. Of our thirty-seven sample items tested, there were no instances of noncompliance pertaining to allowable costs. • Reporting: Quarterly financial reports are prepared by one individual and reviewed by a different individual in management prior to submission to the federal agency. However, evidence of this independent review was not consistently retained. Evidence supporting timely submission was also not maintained, though report dates indicated compliance with required deadlines. Cause: The Organization did not design or maintain sufficient internal controls to ensure consistent performance and documentation of control activities in accordance with federal requirements. Effect or Potential Effect: Due to the absence of adequate control documentation and formalized procedures, the Organization risks noncompliance with federal regulators that could occur and remain undetected. Questioned Costs: None Repeat Finding: No Recommendation: We recommend that management strengthen its internal control framework to ensure accurate and timely reporting, including: • Implement procedures to consistently retain evidence of review and approval for all costs and expenditures. • Develop, formally document, and implement a procurement policy that complies with Uniform Guidance, including maintaining documentation supporting adherence to procurement requirements. • Enhance controls over financial reporting by ensuring that all reports are reviewed by an independent individual and evidence of such review is retained.

Criteria: The Uniform Guidance requires a grantee to maintain a formalized written policy for procurement procedures that is in accordance with, or more stringent than, the federal requirements identified in 2 CFR Part 200. Condition: The Organization does not maintain a written procurement policy. While management indicated that procurement practices were performed in accordance with Uniform Guidance, these procedures were informal and not formally documented. The absence of a documented policy results in noncompliance with the requirements of Uniform Guidance. Cause: The Organization did not formally document procurement policies and procedures in accordance with Uniform Guidance requirements. Effect or Potential Effect: The lack of a formal, documented procurement policy increases the risk that procurement activities may not be performed consistently in accordance with requirements for full and open competition, cost reasonableness, and appropriate vendor selection. Questioned Costs: None Repeat Finding: No Recommendation: We recommend that management develop and implement a formalized procurement policy in accordance with Uniform Guidance and establish controls to ensure consistent application and documentation of compliance.